20 states join U.S. antitrust probe of Family Dollar merger

(REUTERS) – Some 20 state attorneys general have joined the federal antitrust investigation of competing bids by Dollar General and Dollar Tree to buy Family Dollar Stores, a development that potentially complicates the companies’ efforts to win U.S. approval for a deal.

The attorneys general concern focuses on the likelihood that the loss of one of the chains would lead to higher prices for discount store customers, many of whom are poor, said two sources who spoke privately because they were not authorized to speak to reporters.

Family Dollar, the No. 2 U.S. discount retailer, had previously disclosed that state attorneys general were involved in the federal investigation but gave no details.

The 20 states looking at this deal are similar in number to those looking at Comcast’s plan to buy Time Warner Cable and Sysco’s bid for US Foods, both of which are high-profile deals.

Florida is a member of the multi-state group, which joined the Federal Trade Commission to determine if the deals were legal under antitrust law, according to Whitney Ray, spokesman for Attorney General Pam Bondi.

Vermont has also joined, said Jill Abrams, an assistant attorney general in the state. Iowa is also in the group, according to a source who was not authorized to speak to reporters.

Indiana is looking into the mergers, but a spokesperson declined to say if it had formally joined the group.

The presence of the state attorneys general gives the FTC additional lawyers to look at the case, much-needed knowledge of how the merging companies function in the state and how the deal would affect a state’s consumers, said Allen Grunes, an antitrust attorney with the Konkurrenz Group in Washington, DC.

“There are times where federal government wants to do one remedy and you have a state or two who believe that there should be more done in their state. They at times will negotiate additional divestitures,” said Grunes.

Dollar Tree and Family Dollar declined comment. Dollar General has previously said that it remained committed to the transaction and would continue to work with the FTC.

Family Dollar, which has 8,100 discount stores in 46 states, has been targeted for a takeover by both Dollar Tree, which has 5,282 stores in 48 states, and by Dollar General, which is the big dog in discount retailing with 11,000 stores in 40 states.

Family Dollar reported a 47 percent drop in quarterly profit on Thursday as margins fell due to higher discounting. Net income fell to $41.4 million, or 36 cents per share, in the fiscal first quarter ended Nov. 29, from $78 million, or 68 cents per share, a year earlier.

Family Dollar agreed to be bought by smaller rival Dollar Tree for $8.50 billion in cash and stock and rejected a hostile, $9.1 billion offer from Dollar General because of antitrust concerns.

In December, Family Dollar shareholders voted by a wide margin to put off a vote approving the Dollar Tree offer, indicating interest in the higher offer despite its risk.

The great American oil debate: Is cheap fuel good for the U.S.?

There’s one economic statistic that’s never far from the minds of most Americans, and that’s the price of oil.

Sure, your average Joe might not be able to quote the price per barrel of Brent Crude, but he sure knows the price of a gallon of gas at the pump. And in recent weeks, the price of both has been on the decline.

Ramped up global production, questions about future growth in China and Europe, and a strengthening dollar have led to the dip in oil prices. And while one would think that cheaper oil would be good for the American economy, because so much economic activity is powered by oil, there’s reason to believe the opposite. My Fortune colleague Stephen Gandel showed last week how the price oil tends to move in tandem with the S&P 500, suggesting that high oil prices are good for the economy rather than the opposite. James Bianco, president of Bianco Research, agrees, writing last week in a note to clients:

Crude is falling because world demand is weakening, thus signaling economic growth is going in the wrong direction. Crude oil is not falling because the world just discovered the abundant supply brought about from fracking…. To draw an analogy, imagine the following scenario. If a manufacturing plant in your town closes, home prices would probably become more affordable in the area. However, this is not something that should be celebrated. Home prices would be falling because the local economy is heading south.

In other words, oil prices are primarily an effect of economic growth rather than the cause. But this isn’t always the case. Neil Dutta, head of economic research at Renaissance Macro, points to the mid 1980s as the last time when we saw a “sustained, large decline in oil prices during a period of economic expansion.” That’s right, from December 1985 to January 1987, oil prices fell a whopping 30%. And it wasn’t because the American economy was in a slump, as real GDP grew by more than 3.5% in 1986.

Oil prices in the 1980s had dropped largely on account of the relative stability in Middle East politics after turbulence of the 1970s, as well as the discovery of new sources of oil in the North Sea and Mexico. One could draw similar parallels to the situation today, in which developments in fracking technology have unlocked new sources of energy in North America, and the fact that oil production in Libya has tripled since May despite political instability there.

So, analysts like Dutta are skeptical that falling oil prices are necessarily a bad sign right now. “At least part of the decline in oil prices is because of increased production,” he says. Furthermore, the signs that the American economy, at least, is in trouble just aren’t there. “It’s not as if demand in the U.S. is falling. People are buying more cars, driving more, and manufacturing more, so if demand [for oil] is moderating in the U.S., it has more to do with increased efficiency than anything else.”

Rather than worry that falling oil prices are a sign of a slowing economy here at home, Dutta argues we should look at where, within the U.S., the trend of lower oil prices will help and hurt. He studied the economic data from 1986 to see how each state’s economies did during a time of both falling oil prices and brisk economic expansion. Unsurprisingly, he found that states like Texas and Louisiana, which depend heavily on oil production and refining, did poorly, while other states, like Michigan, which manufacture things that use oil as an input, did well. One chart in particular, which tracked changes in real disposable income by state, makes this very clear:

If you hail from such oil-rich states like Texas or North Dakota, watch out, your local economies might be headed for a bit of a rough patch. And for the rest of you: enjoy those cheap gas prices while they last.

The 10 most corrupt states in the U.S.

When we think of government corruption (as one tends to do), our biased minds often gravitate to thoughts of military juntas and third world governments. But, of course, corruption is everywhere, in one form or another. And it’s costing U.S. citizens big time.

A new study from researchers at the University of Hong Kong and Indiana University estimates that corruption on the state level is costing Americans in the 10 most corrupt states an average of $1,308 per year, or 5.2% of those states’ average expenditures per year.

The researchers studied more than 25,000 convictions of public officials for violation of federal corruption laws between 1976 and 2008 as well as patterns in state spending to develop a corruption index that estimates the most and least corrupt states in the union. Based on this method, the the most corrupt states are:

That these places landed on the list isn’t exactly surprising. Illinois, which has gain notoriety for its high-profile corruption cases in recent years, is paired with states like Mississippi and Louisiana, which are some of the least economically developed in the country. The researchers also found that for 9 out of the 10 of the most corrupt states, overall state spending was higher than in less corrupt states (South Dakota was the only exception). Attacking corruption, the researchers argue, could be a good way to bring down state spending without hurting services that people need.

Researchers also found that spending in these states was different than their less corrupt counterparts. According to the report, “states with higher levels of corruption are likely to favor construction, salaries, borrowing, correction, and police protection at the expense of social sectors such as education, health and hospitals.”

The paper explains that construction spending, especially on big infrastructure projects, is particularly susceptible to corruption because the quality of large, nonstandard projects are difficult for the public to gauge, while the industry is dominated by a few monopolistic firms. Corrupt states also tend to, for obvious reasons, simply have more and better paid public servants, including police and correctional officers. The researchers argue that the need for correctional officers is greater in corrupt places too because “the overall extent of corruption will be higher in states with higher numbers of convictions of public officials.”

Of course, it’s not all bad news, as the study also found the least corrupt states too. Citizens of these states–Oregon, Washington, Minnesota, Nebraska, Iowa, Vermont, Utah, New Hampshire, Colorado, and Kansas–can take solace in the fact that they’re not getting ripped off as badly as the rest of us.

Editor’s note: A previous version of this story incorrectly referred to Indiana University as the University of Indiana.